News Release

U.S. Department of Labor For Immediate Release

Office of Public Affairs Friday, October 25, 2002
Boston, Mass. Contact: Sharon Morrissey
BOS 2002-223 Phone: (202) 693-8664

Labor Department Settles Part of Its Lawsuit

With U.S. Alliance Health Care Officials
NEW YORK – The U.S. Department of Labor has negotiated a settlement with some of the
defendants in its lawsuit involving health plans associated with U.S. Alliance, Inc. and
International Benefits Association, Inc. of Washington, D.C.

The defendants, subject to the consent judgment entered Oct. 23, 2002 in federal district court in
Brooklyn, are known as the Nieves defendants and include the above companies as well as
Walter Nieves, Michael Nieves and Jesus Nieves.

Under the consent judgment, Walter Nieves is liable for payment of $2.8 million in unpaid
medical claims due to at least 1,500 participants in the U.S. Alliance-related health plans because
of his fiduciary breaches of the Employee Retirement Income Security Act (ERISA). Under the
direction of the previously court-appointed independent fiduciary David W. Silverman of New
City, N.Y., Walter and Michael Nieves will put up for sale real estate located at 300-400 Willow
Point Lane in Chester, Md., with proceeds of the sale to go into the health plan.

In addition, Walter Nieves agreed that he would pay the plan a percentage of any yearly income
in excess of $50,000 he may have for the next 10 years or until the entire $2.8 million is repaid.
The judgment also permanently bars the Nieves defendants from operating, providing services to
and marketing any employee benefit plan covered by ERISA.

The judgment does not include the Marks defendants (Marie Elena Marks, Timothy Marks,
Michele Jenkinson, Alliance Administrators, Inc., Nexus Administrations Systems, Inc. and
People Care Management, Inc.) with whom litigation continues.

On July 12, 2001, the department obtained a temporary restraining order freezing the assets of
the U.S. Alliance-related companies, corporate executives and plan officials for diverting health
plan assets to themselves. The principals of these companies were previously removed from their
positions with the health plans and temporarily barred from any involvement with plans
governed by ERISA.

The U.S. Alliance-related companies fostered several membership associations that created
health plans on the East Coast. The employers paid contributions to purchase benefits provided
by the various association plans. A preliminary injunction was subsequently issued which
continued the appointment of the independent fiduciary and froze the defendant’s assets.

(more)

U.S. Labor Department releases are accessible on the Internet at http://www.dol.gov. The information in this news
release will be made available in alternate format upon request (large print, Braille, audio tape or disc) from the
COAST office. Please specify which news release when placing your request. Call (202) 693-7773 or TTY (202)
693-3911.
News Release
U.S. Department of Labor For Immediate Release
Office of Public Affairs Friday, October 25, 2002
Boston, Mass. Contact: Sharon Morrissey
BOS 2002-223 Phone: (202) 693-8664

-2-

The associations purportedly sponsored ERISA-covered plans under the names of U.S. Alliance
Valucare, Mannacare, U.S. Alliance Plan, U.S. Alliance Managed Care Partners. These U.S.
Alliance-related plans ceased operations in October 1999.

The consent judgment results from the Labor Department’s July 10, 2001 suit against the
defendants in connection with commissions and fees diverted from payment of benefits. The
department alleged the defendants:
• transferred plan assets to themselves for their personal use starting in 1997 through May
2000;
• diverted plan assets to themselves in the form of sham membership dues and fees,
• caused the plans to become insolvent and subsequently abandoned the plans, leaving
participants with unpaid medical claims;
• charged the plans unreasonable administrative fees, commissions and consultant fees for
services, representing approximately 49% of the contributions paid by employers and
participants for health benefits, and
• failed to obtain a fidelity bond for plans administered by U.S. Alliance and to file Form
5500 Annual Reports with the federal government.

“This action demonstrates our commitment to protect the benefits promised to American
workers,” said Francis C. Clisham, director of the department’s New York Regional Office of the
Pension and Welfare Benefits Administration, which investigated the alleged violations of the
ERISA.

Employers and workers can contact the New York Regional Office at 1-212-337-2462 or
PWBA’s toll free number, 1-866-275-7922, for help with any problems relating to private-sector
pension and health plans.

###

(Chao v. Marks, et al)

Civil Action No. CV-014569

U.S. Labor Department releases are accessible on the Internet at http://www.dol.gov. The information in this news
release will be made available in alternate format upon request (large print, Braille, audio tape or disc) from the
COAST office. Please specify which news release when placing your request. Call (202) 693-7773 or TTY (202)
693-3911.